Helping the average John guy understand the Defi space : Defi real life use cases

"Ok, so I kind of know a little bit of everything in a beginner way about Defi. Can you give me some real life uses/examples?" Sure thing John :

Mariano Conti, Head of Smart Contracts at Maker Foundation, shared his strategy for coping with Argentina's severe inflation during the Devcon 5 Ethereum conference in October 2019. Argentina had one of the world's highest inflation rates, reaching 53.8% in 2019.

To protect his savings from losing value, Mariano arranged to receive his salary in DAI, a stablecoin pegged to the USD. Many Argentinians preferred holding their money in USD due to its stability compared to the rapidly depreciating Argentine Peso. However, the government imposed strict capital controls, limiting citizens to purchasing a maximum of $200 USD per month. This led to a black market for USD where the exchange rate was significantly higher than the official rate.

The situation worsened as the Central Bank of Argentina disclosed personal information of citizens who exceeded the $10,000 purchase limit. Additionally, individuals working for foreign companies and receiving USD payments were required to convert their earnings to Argentine Peso within five days.

Previously, some Argentinian freelancers opted to be paid in Bitcoin, but the cryptocurrency's volatility made it challenging to retain value. Mariano found a solution in DAI, which combines the advantages of cryptocurrencies with stability linked to the USD.

He manages his DAI by withdrawing only the necessary amount each month for expenses like rent, groceries, and bills, keeping his Argentine Peso balance minimal. He also utilizes DAI for various crypto transactions, such as purchasing ETH and earning interest through the Dai Savings Rate.

While acknowledging the smart contract risks associated with DeFi, Mariano views them as a more viable option than holding the Argentine Peso, which is plagued by volatility, inflation, and government control. His experience illustrates how DeFi can provide a valuable financial alternative for individuals in countries facing similar economic challenges, extending beyond Argentina to many other economies worldwide.

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"I want more." Ok John, here is another case :

Sometimes, we encounter frustrating restrictions when trying to access certain videos or apps due to our location or censorship. While it can be irritating, we usually find alternatives or similar apps to meet our needs.

However, things get serious when these restrictions extend to banks and financial institutions. This affects people who rely on these services the most, as they often don't have extra money on hand. They might have to resort to taking loans to cover expenses, creating a chain reaction of financial problems.

In the world of decentralized finance (DeFi), such censorship has occurred. A notable example was the Uniswap decentralized exchange, which banned users from specific countries in December 2019. The Uniswap team made changes to their codebase to exclude users from countries like Belarus, Cuba, Iran, Iraq, and others from accessing their website. They claimed this was to comply with US laws, as their team was based in New York.

However, this move contradicted the essence of DeFi, which is all about providing access to financial services from anywhere in the world. Despite the ban on the Uniswap website, users could still access the Uniswap protocol because it operates on the Ethereum blockchain, which is accessible worldwide. Several sites connected to the Uniswap protocol quickly emerged, allowing banned users to continue using it.

This incident highlighted the strength of DeFi protocols, showcasing something that traditional finance couldn't achieve. An action that initially went against DeFi's core principles ended up demonstrating one of its key strengths.

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"And what you think that the future holds for Defi?" That's a very deep question. Here is my personal answer :

DeFi (Decentralized Finance) is becoming a big deal, and it's happening right now. In the previous chapter, we saw DeFi in action when it was just getting started. But it's grown a lot since then, with both regular folks and big financial players jumping in.

Traditional finance experts have started realizing the value of Bitcoin, often calling it digital gold. However, DeFi offers way more than just Bitcoin. It's not only about cryptocurrencies but also about creating a whole new financial system on the internet.

Even traditional financial institutions are joining the DeFi game. For instance, Siam Commercial Bank invested in Alpha Finance Lab to bridge traditional and decentralized finance. It's all about blending the old with the new.

Here's why we believe DeFi is the future of finance:

1. Big Growth: DeFi started with $1 billion in assets in early 2020, and it's skyrocketed since then. It might not be as massive as traditional markets yet, but the growth is impressive.
2. What DeFi Offers: DeFi is all about transparency, accessibility, efficiency, and convenience. It's open to everyone, no matter who you are or where you're from.
3. Financial Freedom: With DeFi, you can do things like earn money by providing liquidity, get loans without paperwork, and trade automatically. Plus, you can access these services from anywhere with an internet connection.

While DeFi is cool, there's one downside: the user experience isn't always great. But don't worry, teams worldwide are working hard to make it better. They're improving wallets, simplifying DeFi products, making development user-friendly, offering insurance, aggregating liquidity from different exchanges, and optimizing yields.

There might not be one "killer app" for DeFi yet, but it's coming. And when it does, it'll make DeFi even more amazing.

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That's it John, we have finished the book. You should now be ready to solo adventure in the world of Defi. Always remember to be carefull. Always DYOR.

"You said that you have a more advanced book too? I would really like to learn more. Even if they are harder to get, the concepts, terms and everything." We will se John. I can't spoil anything at the moment.

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TL;DR :

1. Surviving Argentina's Inflation: Mariano Conti, from Maker Foundation, managed Argentina's high inflation by getting paid in DAI, a stablecoin tied to the USD. This helped him protect his savings as Argentinians struggled with strict capital controls and a volatile local currency.
2. Uniswap Ban: Uniswap, a decentralized exchange, briefly banned users from certain countries, but it couldn't stop them from accessing the protocol, highlighting the power of DeFi's decentralized nature.
3. The Future of DeFi: DeFi is growing fast, attracting both regular users and big financial players. It offers transparency, accessibility, efficiency, and convenience. Traditional finance is starting to blend with DeFi, making it the future of finance, even though there's still work to do to improve the user experience.

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All of this info was put togheter by me with the help of the How to Defi book from Coingecko. Hope it helped others like it did for our boy John here!